Management Information Systems

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Chapter 6
Transaction Processing, Functional Applications,
and Integration
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Learning Objectives

• Understand the value chain and its purpose
• TPSs
• Purpose, Goal, Objectives, Characteristics
• How TPSs can create competitive advantage
• Understand the major functional areas and ISs
  that support them
• POM
• Marketing and Sales
• Accounting and Finance
• Human Resources
• Managerial issues in organizational use of
  functional ISs

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Functional Areas in a Business
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Functional Areas Value Chain Perspective
(Accounting, Finance, HR, Marketing, Operations)
The value chain model views activities in
organizations as either primary (reflecting the
flow of goods and services) or secondary
(supporting the primary activities). The
organizational structure of firms is intended to
support both types of activities.
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Value Chain, cont

• Goal is to add value along the value chain
• Increase the value of a good/service above the
  cost of making the good/service.
• Lowering cost per good made increases profit
  margin per item.

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Value Chain TPS FOCUS

• One way use ISs to automate do something
  better, faster, more efficiently so that the cost
  per item made decreases
• Identify the cost drivers in each area
• Add or update TPS

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TPS

• TPSs support mission-critical activities
• processes well defined
• computations simple
• thus easily computerized

• A transaction processing system
• Monitors
• Collects
• Stores
• Processes
• Disseminates information
• for all routine core business transactions.

Logistics Operations Sales/marketing Service
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Goal, Objectives of TPS

• The primary goal of TPSs provide the information
  to run the business efficiently.
• Keep the business running properly and
  efficiently
• Ensure accuracy, integrity, security of data
• Provide data for timely documents and reports
• Provide data for tactical and strategic systems
• Increase competitive advantage

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Major Characteristics of TPS

• Process large amounts of data on regular basis
• Data sources are internal and output is for
  internal use
• Large storage capacity required
• Input and output data are generally standard
  (e.g. time cards, sales report, inventory report)
• Low level of computation complexity
• High reliability required Interruptions can be
  fatal, never loses data, high level
  security/privacy

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Value ChainTPS Examples
Mission-critical events (core activities) along
the value chain
Manufacturer
Inbound Logistics
Operations
Outbound Logistics
Sales Marketing
Service
RM requisition Inventory mgmt Schedule production
Quality control Employee Labor
Order RM Pay Suppliers Receive RM Employee Labor
Schedule delivery Track shipments Employee Labor
Sell goods Take orders Buy Ads Schedule
delivery Employee labor
Schedule install Repair orders Employee labor
POM
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Using TPS to gain CA along the Value Chain
Which Dairy has Competitive Advantage? Why?
Dairy B
Dairy A
Dairy uses internet Ordering System for
Inventory
Carton suppliers use extranet Ordering System for
JIT Inventory
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Kinkos updates TPS

• Whats a core activity at Kinkos?
• Past TPS
• Insert a card into copy machine to record the
  number of copies made
• Stand in line and pay for copies
• How did Kinkos improve the TPS?

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Kinkos updates TPS

• How did Kinkos improve the TPS?
• Eliminate the standing in line for the customer
  and cost of employees processing transactions.
• Improvement
• Insert your credit card or store-value card
  purchased from a machine make copies and leave.

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Production/Operations Logistics Areas
The production and operations management (POM)
function in an organization is responsible for
the processes that transform inputs into useful
outputs.

• A few of the IT supported POM areas are
• In-house logistics and materials management
• Planning production/operations
• Computer-integrated manufacturing (CIM)
• Product lifecycle management (PLM)

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POM Logistics/Materials Management Systems

• Inventory management determines how much
  inventory to keep.
• Three types of costs
• Inventory maintenance costs
• Cost of ordering (fixed cost per order)
• Cost of inventory shortage
• Two Basic Decisions
• When to order
• How much to order
• Inventory Management Systems
• Can determine EOQ
• Can support VMI vendor managed inventory
  (extranet)

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POM Planning Systems

• Material Requirements Planning (MRP) is software
  that facilitates the plan for purchasing or
  producing parts
• Manufacturing Resource Planning (MRP II) adds
  functionalities to a regular MRP system by
  determining the costs of parts, labor, tools,
  equipment repair, and energy while generating a
  requirements report.
• Just-in-Time Systems is an approach that attempts
  to minimize waste of all kinds (of space, labor,
  materials, energy).
• Materials delivered exactly when needed
• No need for inventory, no production delays, no
  idle time
• Project Management. A project is usually a
  one-time effort composed of many interrelated
  activities, costing a substantial amount of
  money, and lasting for weeks or years.
• Software tools such as program evaluation and
  review technique (PERT) and the critical path
  method (CPM) are used to manage milestones,
  resources, costs, etc.

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POM Systems, cont
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Marketing and Sales Systems, cont
Marketing and Sales information systems identify
customers, create customer awareness, support
selling, and provide ongoing customer support.
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Marketing and Sales Systems, cont
Channel systems are the systems involved in the
process of getting a product or service to
customers and dealing with their needs. These
systems link marketing, sales, procurement,
logistics, and delivery activities with other
corporate functional areas.

• Some of the channel-system activities are
• customer relations
• distribution channels and in-store innovations
• marketing management
• telemarketing

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Accounting and Finance Systems
Accounting and finance functional areas manage
the inflows and outflow of organizational
assets. This involves all functions of an
organization including payroll, billing, cash
management, etc.
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Accounting and Finance Systems, cont

• Financial Planning and Budgeting
• Financial and Economic Forecasting
• Planning for Incoming Funds
• Budgeting
• Capital Budgeting
• Managing Financial Transactions
• General Ledger
• Stock trades
• Invoicing
• Accounts Receivables
• E-Commerce Applications of Financial Transactions
  
• Global stock exchanges and multiple currencies
• E-Bonds
• Factoring online
• Electronic re-presentment of checks
• Electronic bill presentment and payments

• Virtual Close
• Expense Management Automation
• Investment Management
• Financial Analysis
• Access to Financial and Economic Reports
• Control and Auditing
• Budgetary Control and Auditing
• Financial Ratio Analysis
• Profitability Analysis and Cost Control
• Product Pricing

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Human Resources Systems
Web-based HR systems have increased the
popularity of human resources information systems
which provide applications mainly related to
acquiring, hiring, rewarding, developing,
training, protecting and retaining human
resources.
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Human Resources Systems, cont

• Recruitment
• is finding employees, testing them, and deciding
  which ones to hire. The Web has enhanced the
  recruitment process.
• Position Inventory
• HRM Portals and Salary Surveys
• Employee Selection
• Human Resources Maintenance and Development
• Performance Evaluation
• Training and Human Resources Development

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Human Resources Systems, cont

• Human Resources Planning and Management
• Personnel Planning
• Labor Management Negotiations
• Employees Records
• Benefits Administration
• Employee Relationship Management

Responsible for the workforce
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Enterprise Wide Information Systems
Integration of Cross-Functional Information
Systems tears down barriers between and among
departments corporate headquarters and reduces
duplication of effort.
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MANAGERIAL ISSUES

• Integration of functional information systems
• willingness to share information
• Priority of transaction processing
• must receive high priority in resource allocation
• The customer is king/queen
• external or internal customer
• Using the Web
• effective, cost relatively little, user friendly
• System integration
• Web services can help